The much-anticipated S D Retail IPO opens for subscription from September 20, 2024, to September 24, 2024. This IPO offers 49.6 lakh shares, raising a total of ₹64.97 crores, of which ₹18.49 crores have already been raised from anchor investors. Beeline Capital Advisors Private Limited is the book-running lead manager, and KFIN Technologies Limited will handle the allotment process. The shares are expected to be listed on the NSE SME platform on or around September 27, 2024.

The price band for the IPO has been set between ₹124 to ₹131 per equity share. For retail investors, the minimum lot size is 1,000 shares, meaning a minimum investment of ₹131,000. High-Net-Worth Individuals (HNIs) must invest a minimum of 2 lots, equivalent to 2,000 shares at ₹262,000. Retail and HNI investors alike have shown significant interest in this IPO due to its potential for future growth in the sleepwear market under the brand name "SWEET DREAMS".

Financial Overview of S D Retail

S D Retail is a sleepwear-focused company with its brand, SWEET DREAMS, offering stylish and comfortable sleepwear for men, women, and children. The company’s focus on transitioning from work to home life aligns well with modern trends of comfort and casual wear, increasing the demand for such products.

Financial performance for the fiscal years has shown steady growth, with revenues of ₹16,328.48 lakhs in FY 2024, up from ₹13,568.86 lakhs in FY 2023, and ₹12,873.65 lakhs in FY 2022. The company's EBITDA has seen fluctuations, standing at ₹1,334.80 lakhs in FY 2024, compared to ₹760.85 lakhs in FY 2023 and ₹1,363.21 lakhs in FY 2022. Despite the mixed EBITDA performance, the company shows a profit after tax (PAT) of ₹759.76 lakhs in FY 2024, indicating a return to profitability after a dip in FY 2023, where the PAT was ₹430.17 lakhs, down from ₹1,011.06 lakhs in FY 2022.

The pre-issue earnings per share (EPS) stands at ₹5.52, with the post-issue EPS expected to reduce to ₹4.05. The pre-issue price-to-earnings (P/E) ratio is 23.73x, and the post-issue P/E ratio is 32.34x, suggesting the shares are moderately priced, with room for growth depending on market conditions.

Anchor Investors and Grey Market Premium (GMP)

Anchor investors have shown confidence in the IPO, subscribing at the upper price band of ₹131 per share. This portion of the shares accounts for ₹18.49 crores, signaling positive market sentiment. The Grey Market Premium (GMP) for S D Retail ranges between ₹5 to ₹10, indicating a 5% to 10% potential listing gain. However, it’s important to note that GMP is speculative and based on demand-supply dynamics in an unorganized market. Therefore, it should not be the sole factor in investment decisions.

IPO Allotment and Listing Details

The allotment of shares is scheduled to take place on September 25, 2024. Investors can check their allotment status by visiting the registrar's website on the allotment date. The process is simple:

Go to the IPO allotment page.

Select S D Retail IPO from the dropdown.

Enter your application number, PAN, or DP Client ID to check the status.

The company has earmarked the IPO proceeds for three main purposes:

Capital expenditure of ₹1648.85 lakhs for setting up new exclusive brand outlets (EBOs).

₹3500.00 lakhs to fund working capital requirements.

The rest will be used for general corporate purposes.

Conclusion and Expert Opinion

Despite the company's consistent growth and solid financials, industry experts have mixed opinions about whether investors should subscribe to the IPO. The price-to-earnings (P/E) ratio appears to be on the higher side post-issue, and the overall return on capital employed (ROCE) for FY 2024 is 15.61%, with a return on equity (ROE) of 6.29%. These metrics suggest that while the IPO is fairly priced, it may not offer significant listing gains or long-term growth potential for investors.

Therefore, CA Abhay Kumar, a SEBI-registered research analyst, advises investors to approach the S D Retail IPO with caution. The company's financials, while strong, may not justify the current valuation for listing gains or long-term holding. Retail investors are advised to wait and observe the demand in the market, especially around the time of allotment.

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